Do Businesses need to be GST compliant? What are the benefits?

Businesses need to pay taxes on the revenue and the income they generate. they are in the form of Direct taxes and indirect taxes. Direct taxes are one that are levied on the citizen or businesses on the annual income i.e Income tax, Corporate tax, Capital gains tax, etc. Indirect taxes are levied on goods and services which are payable to and by businesses on the value addition. Some notable examples of indirect taxes are Goods and Service Tax (GST), Value Added tax (VAT), Excise Duty, Customs Duty, etc. In this blog, we’ll get to know about GST, its eligibility and benefits it offers.

What is Goods and Service Tax (GST)?

GST is known as the Goods and Services Tax. It is an indirect tax which has replaced many indirect taxes in India such as the excise duty, VAT, services tax, etc. The Goods and Service Tax Act was passed in the Parliament on 29th March 2017 and came into effect on 1st July 2017. Goods and Service Tax (GST) is levied on the supply of goods and services. Goods and Services Tax Law in India is a comprehensive, multi-stage, destination-based tax that is levied on every value addition. GST is a single domestic indirect tax law for the entire country.

Is GST advantageous?

GST has mainly removed the cascading effect on the sale of goods and services. Removal of the cascading effect has impacted the cost of goods. Since the GST regime eliminates the tax on tax, the cost of goods decreases.

Also, GST is mainly technologically driven. All the activities like registration, return filing, application for refund and response to notice needs to be done online on the GST portal, which accelerates the processes.

• Removes cascade effect of tax
• Composition scheme for small business
• Simpler Online facilities
• Increased logistics efficiency
• regulation of Unorganized businesses

What are the components of GST?

There are three taxes applicable under this system: CGST, SGST & IGST.

• CGST: It is the tax collected by the Central Government on an intra-state sale (e.g., a transaction happening within Maharashtra)
• SGST: It is the tax collected by the state government on an intra-state sale (e.g., a transaction happening within Maharashtra)
• IGST: It is a tax collected by the Central Government for an inter-state sale (e.g., Maharashtra to Tamil Nadu)

Who should register for GST?

• Individuals registered under the Pre-GST law (i.e., Excise, VAT, Service Tax etc.)
• Businesses with turnover above the threshold limit of Rs. 40 Lakhs* (Rs. 10 Lakhs for North-Eastern States, J&K, Himachal Pradesh and Uttarakhand)
• Casual taxable person / Non-Resident taxable person
• Agents of a supplier & Input service distributor
• Those paying tax under the reverse charge mechanism
• Person who supplies via e-commerce aggregator
• Every e-commerce aggregator
• Person supplying online information and database access or retrieval services from a place outside India to a person in India, other than a registered taxable person

What documents are required for registration?

• PAN of the Applicant
• Aadhaar card
• Proof of business registration or Incorporation certificate
• Identity and Address proof of Promoters/Director with Photographs
• Address proof of the place of business
• Bank Account statement/Cancelled cheque
• Digital Signature
• Letter of Authorization/Board Resolution for Authorized Signatory

GST filing can help avail Loans

Regular filing of GST helps lenders understand the revenue of a business. This makes the lending process simple as they get to know how the business is functioning and generating revenue. Also, GST filing is mandatory to avail Business Loan.

Click here to apply for a Business Loan.

Source: ClearTax